The mechanisms explaining how parental depression compromises healthy child development are complex and multifaceted, with genetic and environmental pathways intertwined. Reexamination of whether and how maternal and paternal depression serve as environmental risk factors is important because such an investigation can be helpful to identify modifiable mechanisms that are accessible to interventions. We review studies that have employed designs that isolate the effects of the environment from genetic influences, including adoption studies and children of twins studies. Findings indicate that maternal depression is an environmental risk factor for the emotional, behavioral, and neurobiological development of children. Although more studies are needed, preliminary findings suggest that paternal depression appears to be a weaker environmental risk as compared to maternal depression, at least during infancy and toddlerhood. Implications for theory and future research are discussed.